Correlation Between Polkadot and Adshares

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Can any of the company-specific risk be diversified away by investing in both Polkadot and Adshares at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Polkadot and Adshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Polkadot and Adshares, you can compare the effects of market volatilities on Polkadot and Adshares and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Polkadot with a short position of Adshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Polkadot and Adshares.

Diversification Opportunities for Polkadot and Adshares

0.63
  Correlation Coefficient

Poor diversification

The 3 months correlation between Polkadot and Adshares is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Polkadot and Adshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adshares and Polkadot is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Polkadot are associated (or correlated) with Adshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adshares has no effect on the direction of Polkadot i.e., Polkadot and Adshares go up and down completely randomly.

Pair Corralation between Polkadot and Adshares

Assuming the 90 days trading horizon Polkadot is expected to generate 1.63 times less return on investment than Adshares. In addition to that, Polkadot is 1.14 times more volatile than Adshares. It trades about 0.32 of its total potential returns per unit of risk. Adshares is currently generating about 0.59 per unit of volatility. If you would invest  210.00  in Adshares on May 15, 2022 and sell it today you would earn a total of  153.00  from holding Adshares or generate 72.86% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Polkadot  vs.  Adshares

 Performance (%) 
       Timeline  
Polkadot 
Polkadot Performance
0 of 100
Over the last 90 days Polkadot has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Polkadot is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Polkadot Price Channel

Adshares 
Adshares Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Adshares are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Adshares sustained solid returns over the last few months and may actually be approaching a breakup point.

Adshares Price Channel

Polkadot and Adshares Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Polkadot and Adshares

The main advantage of trading using opposite Polkadot and Adshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Polkadot position performs unexpectedly, Adshares can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Adshares will offset losses from the drop in Adshares' long position.
The idea behind Polkadot and Adshares pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
Check out your portfolio center. Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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